They also cautioned against engaging in bottom fishing, or buying the shares expecting the price to have bottomed out, during this market downturn.
The shares closed at ‘231.7 on the BSE on Saturday. The stock market had a holiday on Monday.
Monday’s announcement marks the conclusion of a two-year deal process. The merger with Sony, according to analysts, was expected to potentially rescue Zee from its current crises and decline in market share.
“Given the cancellation of the deal, the near-term stock will be under pressure and go back to its pre-merger PE multiple of 12-13 times or below ‘200,” said Abneesh Roy, executive director – research at Nuvama Institutional Equities. “Given the uncertainties surrounding the identification of a new partner, an ongoing legal case with Sony involving $90 million, and the potential deal between Viacom and Disney, bottom fishing in Zee shares could be deemed a risky proposition.”The Zee stock has declined 15% in the past one month, in contrast to a 1% gain in the Nifty index, primarily due to uncertainties surrounding the merger. Following the deal announcement in December 2021, Zee shares had surged from about ‘170 to around ‘370.
As of December 2023, foreign institutional investors owned a 28.19% stake in the company, while domestic institutional investors held 43.42% and retail investors had 24.24%. Among the significant shareholders, mutual funds such as ICICI Prudential, Nippon India and HDFC MF owned between 5.26% and 7.25%, respectively, while Life Insurance Corporation of India held 5.12%.According to a fund manager, the merger would have been ideal for Zee and Sony, especially considering the evolving dynamics in the industry with the merger of Disney and Viacom. On the failure of the deal, he said not only would Zee shareholders be affected, but the company itself might face a series of downgrades in the near term.
Corporate governance firms blamed the promoters and the board for the breakdown of the deal.
“The 96% non-promoter shareholders have a right to hold the board accountable as the promoters and the board of Zee were not able to deliver on the merger. Investors have been frustrated due to the prolonged discussions and last-minute negotiations,” said Shriram Subramanian, founder and managing director of InGovern Research Services. “Public shareholders have been voting against the directors in the past and will likely work towards a change in the entire board by calling an EGM (extraordinary general meeting).”
On Sunday, Moneycontrol, citing sources, reported that a clutch of institutional investors, including Life Insurance Corporation, had written to the Securities and Exchange Board of India that the stalemate in the company’s merger talks with Sony group was hurting minority shareholders.
